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Changes in NAB Law

Zaki Rahman

On December 28, 2019, the much-awaited National Accountability (Second Amendment) Ordinance, 2019 (“Amendment Ordinance”) was promulgated. The ordinance was perhaps inevitable given the growing unease at the perceived high-handedness of the National Accountability Bureau (NAB).

Two powerful interest groups, namely the business community and the bureaucracy, have been the most vocal in the rising chorus of voices complaining about NAB.

The business community has made no secret of its unhappiness with NAB and has taken up the matter at every level of government and even during a meeting with the Chief of Army Staff. As far as the bureaucracy is concerned, it is widely believed that its working had been paralysed to a large extent due to the growing fear of NAB prosecutions.

With business investment drying up and public sector projects stalling due to the refusal of the bureaucracy to proceed, the government’s hand was forced and it was only a matter of time before NAB’s wings were clipped. The result is the Amendment Ordinance, whereby a number of amendments have been made in the National Accountability Ordinance, 1999.

From the perspective of the business community, two amendments are important.

Taxation

Firstly, taxation matters have been expressly excluded from the jurisdiction of NAB. As a corollary, the Amendment Ordinance states that all pending investigations shall stand transferred to the authority which administers the relevant law of taxation. Essentially, this means that cases of tax fraud or evasion that were being investigated by NAB shall henceforth be investigated by the Federal Board of Revenue (FBR) for federal taxes and by provincial tax bodies (such as the Punjab Revenue Authority and the Sindh Revenue Board) for provincial taxes.

Similarly, pending trials in respect of tax matters shall stand transferred from accountability courts to courts set up under relevant taxation laws.

This is a welcome development for the business community. Serious reservations had been expressed by businessmen regarding the manner in which NAB had allegedly been investigating tax matters. There is a general perception that NAB investigators lack the specialised knowledge of tax laws and procedures required for proper investigation into such matters with the result that the inquiry turns into an exercise in futility. Moreover, there are allegations of NAB arbitrariness and harassment stemming from political victimisation.

On the other hand, it is true that in many jurisdictions across the world, tax fraud is investigated through a collaborative effort of agencies with external investigative agencies often assisting the tax collector. For example, in the United States, the Federal Bureau of Investigation (FBI) uses its experience of investigating financial crimes to assist the Internal Revenue Service (IRS) in probing cases of tax fraud.

Since the power of NAB to enquire into tax matters has been taken away, it is important that the institutional capacities of FBR and other tax agencies are enhanced to ensure that tax crimes are effectively investigated and prosecuted.

Private persons can no longer be investigated

The second relevant amendment from the viewpoint of the business community is that, with a few exceptions, private transactions have been taken out from the ambit of the NAB law. In other words, NAB has been largely disempowered from investigating any person or transaction — unless the person or transaction is connected with a public office holder.

This is a potentially significant change.

It will be recalled that one of the most prominent businessmen in Pakistan was summoned by NAB in connection with the purchase of a hotel in London. Following the Amendment Ordinance, it could be argued that NAB would be unable to investigate or prosecute matters of this sort under the NAB Ordinance since the businessman in question has not been a public office holder and the purchase of the hotel is a private transaction (although it would still be possible for other relevant state agencies, such as the Federal Investigation Agency, to inquire into such matters and even NAB may still be able to do so under other relevant laws such as the Anti-Money Laundering Act, 2010).

Similarly, under the definition of the offence of “willful default”, it was theoretically possible for NAB to investigate loan defaults of a private person to a private bank upon a reference from the Governor of the State Bank. NAB would no longer be able to take cognisance of such loan defaults involving private parties.

By the above-mentioned measures, the government hopes to allay the fears of entrepreneurs and persuade them to inject much-needed investment into the economy.

However, there is another important cog in the wheel of the economy which needs to be oiled for the smooth functioning of the same.

Safeguards for bureaucracy

Part of the recent economic slowdown can be attributed to the bureaucracy dragging its heels in approving or implementing public sector projects. From construction to healthcare to energy, many projects are at a standstill due to the expressed fears of the bureaucracy regarding NAB. The situation has been exacerbated by NAB’s arrest of prominent bureaucrats, such as the arrest of Ahad Cheema in connection with the Ashiana Housing Scheme.

Among other things, bureaucrats have been complaining that NAB has been investigating and prosecuting them for relatively minor procedural lapses in projects. The perception is that the bureaucracy is put under scrutiny for alleged misuse of authority even where there is no conscious flouting of laws for any undue benefit or any other evidence of corruption. In addition, there have been complaints that NAB has been filing references where commercial judgments of the bureaucracy in undertaking projects have been put into question and cases of alleged loss to the exchequer through errors of commercial judgment have been instituted although no evidence of any actual corruption exists.

It is in this context that the amendments in the NAB law regarding “holders of public office” (which includes bureaucrats, federal and provincial ministers as well as members of parliament and the provincial assemblies) need to be examined. These amendments may be summarised as follows:

(i) An explanation has been inserted in the NAB Ordinance that the offence of “misuse of authority” cannot be made out against a public office holder unless there is corroborative evidence showing accumulation of monetary asset or benefit which cannot reasonably be accounted for;

(ii) It has been clarified that no offence can be made out against a public office holder for any act done in good faith or for mere procedural lapses in the absence of corroborative evidence of accumulation of any monetary asset or benefit which is disproportionate to known sources of income and cannot be reasonably accounted for.

Thus, in order to put bureaucrats and other holders of public office in the dock, actual evidence of financial corruption would need to be produced by NAB and mere errors of commercial judgment or procedural lapses would be insufficient to convict.

As far as procedural lapses are concerned, this was the law laid down by the Supreme Court even before the Amendment Ordinance as the Supreme Court had in several cases held that mere procedural lapses did not amount to an offence.

However, by putting the clarification in the NAB statute itself, a message has been sent out to holders of public office, particularly the bureaucracy, that they will be protected from unwarranted prosecution.

There is one other amendment in the context of public office holders that needs to be looked at.

Valuation of immovable properties

As per the Amendment Ordinance, the valuation of immovable properties for the purposes of assessing whether a public office holder has assets disproportionate to his known sources of income shall be reckoned either at the District Collector (DC) rate or the FBR rate, whichever is higher. In certain cases, these rates may be significantly less than the market value of the property at the relevant time that the public office holder purchased the property and thus, allow a holder of public office to get away with explaining less than his or her entire wealth.

Although it is notoriously difficult to prove the market value of land, the solution arrived at in the Amendment Ordinance for fixing this issue may give rise to more problems in tackling corruption than it solves.

There is some criticism doing the rounds that the amendments will only apply to future cases and are thus meant only to shield the ruling party’s officeholders (along with the bureaucracy) while previous office holders of the opposition against whom cases are pending will not be able to avail the defences now made available pursuant to the Amendment Ordinance.

This is a debatable issue since there are contradictory precedents in the matter.

Courts in the past have in certain cases held that explanations inserted in the law will only apply prospectively for future cases while in other cases the courts have held that explanations can apply retrospectively as well. It remains to be seen whether the courts will apply the explanation added in the NAB law prospectively or will hold that it also covers past transactions. In the coming days, one can certainly expect opposition politicians facing references and trials to seek taking advantage of the amendments in the law.

NAB can still arrest an accused at any stage of the inquiry

It may also be pointed out that the Amendment Ordinance does not address several commonly levelled criticisms of the NAB law and operations. Thus, the discretionary powers of the NAB chairman to arrest an accused at any stage of the inquiry remains intact as does the power to detain the accused in NAB custody for a period of 90 days for investigation purposes. The power to grant bail has not been given to accountability courts.

Recently, the Supreme Court [questioned the “arrest first” policy][3] of NAB and criticised the accountability watchdog for arresting people in haste and only starting to collect evidence later. There is also the issue of who will watch the watchdog. In many countries, the performance of watchdogs is subject to parliamentary scrutiny and oversight. A similar practice needs to be incorporated in Pakistan.

Finally, it should be kept in mind that the Amendment Ordinance is only a temporary piece of legislation and the government will need to take the opposition into confidence in order to ensure that the ordinance is converted into an Act of Parliament.

While the amendments in the NAB law may not be perfect, it is hoped that they will go some way towards addressing the concerns of key stakeholders in the economy of Pakistan. The economy is at such a critical juncture that even a party like the Pakistan Tehreek-i-Insaf, with its massive emphasis on accountability, has realised that it cannot do without reining in NAB and curtailing its powers.

It remains to be seen to what extent the amendments facilitate a conducive business environment where private and public sector projects and investments can contribute towards achieving the goal of a thriving economy.

Courtesy: Daily Dawn

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